Johnson challenges IRS Obamacare gimmick

The freshman senator from Wisconsin is challenging the IRS rule that circumvents Congress to support the creation of federal-facilitated health insurance exchanges and expose millions of Americans to Obamacare penalties.

When President Barack Obama and the Democrats passed the 2010 Patient Protection and Affordable Care Act, they made a poorly crafted law, said Sen. Ron Johnson, who beat liberal icon Russ Feingold in 2010. In the law, individual states are expected to establish health care insurance exchanges, which are to be marketplaces where insurance plans are bought and sold.

Johnson said, as someone who is trying to frustrate the implementation of the health care law, he cannot ignore a bureaucratic gimmick to fix a problem that should be resolved in Congress.

The mechanism for Johnson’s challenge is a Resolution of Disapproval, Senate Joint Resolution 48, a privileged motion authorized by the Congressional Review Act, which empowers Congress to undo regulations promulgated by the executive branch with a majority vote in both chambers, he said.

The IRS rule in question pivots on six characters in the law, said Michael Cannon, the director of Health Policy Studies at the Washington-based Cato Institute.

Cannon said the IRS put out the rule in 76 Federal Register 50934 dated Aug. 17, 2011: “a taxpayer is eligible for the credit … if … the taxpayer or a member of the taxpayer’s family enrolled in one or more qualified health plans through an Exchange established under section 1311 or 1321 of the Affordable Care Act.” [Emphasis added.]

The six characters: “or 1321,” are key because section 1321 spells out federally facilitated exchanges, but the actual language of the Affordable Care Act does not authorize federal subsidies or tax credits for participation in a 1321 exchange, he said.

Johnson said, “These subsidies and tax credits will be paid through exchanges, and here is the keyword: ‘established by the state under 1311,’ the only language in the bill in terms of allowing subsidies or the tax credit to be paid is through exchanges established by the state.”

“Massive screw-up by the Democrats”

The Obama administration wrote the health care law so it depended on state-established exchanges in order to blunt the charge that the federal government was taking over health care, he said. In other words, state exchanges, rather than federal, gave them political cover.

The major miscalculation was that so many states would not embrace the exchange mechanism, Johnson said, as it was assumed the states would cooperate. “That’s a problem because only 15 states have actually established these exchanges, 35 have taken a hands-off attitude, at least so far,” he said.

Not only does the law only authorize tax credits and subsidies for state-established exchanges, the penalties are tied to the state-established exchanges, he said.

The penalty regime does not punish employers for failing to provide health care insurance, until an employee becomes eligible for a tax credit or subsidy for his participating in a state-established exchange, the senator said.

If there is no state-established exchange, there is no penalty, he said. Without the carrots-and-sticks of subsidy, tax credits and penalties operating at the state level, the entire Obamacare implementation scheme is jeopardized.

“Obviously this is a massive screw-up by the Democrats, who rushed this bill through,” he said.

Brown’s role

On Christmas Eve 2009, one month before the election of Massachusetts Sen. Scott Brown (R) to fill the seat left empty by the passing of Sen. Edward Kennedy, Sr. (D-Mass.), the Democrats in the Senate rushed through President Barack Obama’s health care reform bill.

Once Brown gave the Republicans their 60th vote in the upper chamber, they had the ability to block further action, and thus the bill’s language was frozen.

In the regular legislative process, the House and Senate each pass bills and the differences between the bills are hashed out in a conference committee, which is made up of members from both houses, who produce a single bill. Before reaching the president’s desk, both chambers must approve the conference committee’s bill.

Unable to control the Senate, Democrats were not only stuck with the language of their Senate bill in the upper chamber, they could not risk going to conference. The only way to avoid going to conference was for the House to pass the exact Senate bill and then send it on to the president.

When the Democrats lost control of House and effective control of the Senate in the 2010 mid-term elections, any changes in the law would involve the Republicans.

After the law was signed by the president in March 2010, the Treasury Department, through the IRS, changed the law without dealing with lawmakers on Capitol Hill, as the realization sunk in that many states were not going to set up exchanges and that the administration would need to enable a federal agency, such as Health and Human Services, to fill the gap.

Johnson launches the challenge

To initiate the challenge process, Johnson needed to collect 30 signatures from other Senators on a discharge petition, he said. “We have the required number of signatures to bring this to the floor.”

The Badger State senator said he collected the bulk of the signatures at a Sept. 11 luncheon for Republican senators. “We have 34 now, and we are trying to get every Republican, naturally.”

The petition is supported by the Republican leadership, including Senate Minority Leader Mitch McConnell (R-Ky.).

A press spokesman in Brown’s office confirmed he has not yet signed the petition.

“A lot of time these discharge petitions take a while to get the signatures,” he said. “We have already met the threshold level and we are taking a look for the next step.”

Johnson said he spoke to the Mitt Romney campaign before the August recess about his bill and would guess that the former Massachusetts governor would support the bill.

The popularity of the bill outside the Washington beltway took Johnson by surprise, he said. “We have 46 outside groups that have notified us of their support and 50,000 people have signed an online petition,” he said.

Although the resolution is privileged, Senate Majority Leader Sen. Harry Reid (D-Nev.) still controls the agenda, so the challenge is to force a vote on the floor before the election, he said. “[Democrats] want to make sure there are no tough votes, but they may want to throw a couple political votes at us before they leave town,” he said. “Frankly, I’m a little worried about the relative complexity of the subject matter that it’s going to be difficult to explain it on the Senate floor,” Johnson said. “We still have work to do to clarify and simplify,” he said.

Phil Kerpen, the president of Washington-based American Commitment, said he is grateful that Johnson is making the effort to reverse the rule: “I’ve argued to Republicans that this is a smart thing to do.”